Document of The World Bank FOR OFFICIAL USE ONLY

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY PROJECT PAPER ON A PROPOSED ADDITIONAL FINANCING IN THE AMOUNT OF US$27 MILLION TO THE LEBANESE REPUBLIC FOR THE CULTURAL HERITAGE AND URBAN DEVELOPMENT PROJECT Sustainable Development Middle East and North Africa Region March 13, 2012 Report No: LB This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS Exchange Rate Effective January 1, 2012 Currency Unit = Lebanese Pound (LL) LL1 = US$ US$1 = LL 1,505 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS AFD French Agency for Development CPS Country Partnership Strategy CDR Council for Development and Reconstruction DGA Directorate General of Antiquities EA Environmental Assessment EIB European Investment Bank EMP Environmental Management Plan EU European Union GDP Gross Domestic Product GoL Government of Lebanon ICB International Competitive Bidding IDF Institutional Development Fund M&E Monitoring and Evaluation MIU Municipality Implementation Unit MOC Ministry of Culture MOE Ministry of Environment MOH Ministry of Health MOIM Ministry of Interior and Municipalities MOT Ministry of Tourism MPWT Ministry of Public Works and Transportation O&M Operation and Maintenance PDO Project Development Objectives PMU Project Management Unit RAP Resettlement Action Plan SA Social Assessment Vice President: Country Director: Sector Manager: Task Team Leader: Inger Andersen Hedi Larbi Franck Bousquet Chantal Reliquet -ii-

3 LEBANESE REPUBLIC ADDITIONAL FINANCING FOR THE CULTURAL HERITAGE AND URBAN DEVELOPMENT PROJECT TABLE OF CONTENTS Project Paper Data Sheet I. Introduction... 1 II. Background and Rationale for Additional Financing... 1 III. Proposed Changes... 6 IV. Appraisal Summary... 6 Annex 1: Annex 2: Annex 3: Annex 4: Revised Results Framework and Monitoring Indicators.11 Operational Risk Assessment Framework...17 Revised Estimate of Project Costs and Financing Plan...19 Cost Effectiveness Analysis Summary 21 -iii-

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5 Date: March 13, 2012 Country: Lebanese Republic Project Name: Cultural Heritage and Urban Development Project Original Project ID: P AF Project ID: P PROJECT PAPER DATA SHEET Team Leader: Chantal Reliquet Sector Director: Junaid Ahmad Sector Manager: Franck Bousquet Country Director: Hedi Larbi Environmental Category: B ORAF Rating: Substantial Borrower: Lebanese Republic Responsible Agencies: Council for Development and Reconstruction (CDR); Director General of Antiquities (DGA); and the Municipalities of Baalbeck, Saida, Byblos, Tripoli and Tyre Revised estimated disbursements (Bank FY/US$m) FY Annual Cumulative Current closing date: December 31, 2012 Revised closing date: December 31, 2015 Does the restructured or scaled-up project require any exceptions from Bank policies? Yes No Have these been approved by Bank management? Yes No Is approval for any policy exception sought from the Board? Yes No Does the scaled-up or restructured project trigger any new safeguard policies? No For Additional Financing [X] Loan [ ] Credit [ ] Grant For Loans: Total Bank financing (US$m.): Proposed terms: IBRD Fixed-spread, denominated in US dollars, with a maturity of 11.5 years including an 11 year grace period. Borrower IBRD French Agency For Development Total Financing Plan (US$m.) (AF) Source Total Financing Plan (US$m.) (Original project + AF) Source Borrower IBRD France: French Agency For Development and Government of France Government of Italy Total Total iv-

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7 I. INTRODUCTION 1. This Project Paper (PP) seeks the approval of the Executive Directors to provide an Additional Loan in the amount of US$27 million to the Lebanese Republic for an Additional Financing (AF) for the Cultural Heritage and Urban Development Project (CHUD). 2. The proposed Additional Loan would help finance the cost over-run of works originally planned under the project, i.e. the delivery of improved public spaces, street upgrading, historical facade restorations, building rehabilitation, and associated activities. No changes are being suggested to the original project outputs. The Project Development Objectives (PDOs) also remain the same. 3. Partnership Arrangements. The Ministry of Culture (MOC), in partnership with the municipalities of Baalbeck, Saida, Byblos, Tripoli, and Tyre, has taken the lead in creating a viable environment for generating local economic development and improving conservation and management of Lebanon s cultural heritage. The original project is co-financed in parallel by other donors (French Agency for Development, Government of France, and Government of Italy). For the Additional Financing, a new agreement for parallel co-financing from the French Agency for Development (AFD) has been signed between AFD and the Council for Development and Reconstruction (CDR) on December 15, There is no joint co-financing under the proposed Additional Financing. II. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING 4. Background: Lebanon has a rich and diverse culture inherited from the many civilizations that existed on its territory. It is a small and highly urbanized country with 90% of its 4.5 million people living in urban areas. Most of Lebanon's internationally renowned cultural heritage sites are found in the urban areas, including in the very cores of historic cities. Due to pressures of modern development, post-war reconstruction and lack of the means and mechanisms for heritage site preservation, the unique cultural heritage is suffering from neglect and is progressively being lost to modern construction. Lebanon is also known for its active cultural scene, full of events, festivals and exhibitions. However, the loss of historic urban fabric and monuments in the secondary cities is threatening survival of many traditions, skills and activities practiced in an authentic urban setting. 5. Little economic benefit is derived presently by local residents or municipalities from the rich cultural assets that are found within their communities. Municipalities do not have enough capacity to program and implement infrastructure investments that would stimulate private sector initiatives. These initiatives would potentially create jobs and ensure an additional source of revenue from fees, property and professional taxes levied on productive operation of rehabilitated and re-used historic properties. Local commercial, social, and recreational activity is largely marginal or irrelevant to the cultural heritage environment, resulting in a sense of opposition between local socio-economic development needs and the heritage preservation and tourism industry. Most tourism revenues are either captured by foreign tour operators or by a small group of Beirut-based agencies and hotels. -1-

8 6. Archeological and historic sites are often poorly presented, with inadequate information and orientation for the tourists. They sometimes represent significant safety hazards because of unstable or crumbling structures and unregulated circulation. They also lack basic amenities, such as visitor parking lots, shaded areas, seating, and toilets. In urban areas, the condition and access to cultural assets are further jeopardized by traffic congestion, chaotic parking, omnipresence of solid waste and wastewater, and in some cities, degradation of the coastal zones. Touristic accommodation of all types is scarce. Despite rich culinary traditions, historic cores lack restaurants and cafes of all grades where visitors can stop while moving in the old cities. Traditional activities and artisan workshops are dispersed, poorly organized and promoted, and need assistance to improve the competitiveness of their products on the regional market. 7. Rationale for Additional Financing: The need for additional financing is due to cost over-runs caused by the following: (a) After a lengthy process of geographical targeting, project identification and design, only the first batch of investments could be appraised in order to respond to the government s request for implementing the rehabilitation work without delays, but the estimated costs for the remaining batches proved to be substantially below those required for project execution; (b) High country inflation between 2003 and 2010, aggravated by soaring construction material prices in the international market, particularly for steel, cement and asphalt, as well as the introduction of new environmental regulation that led to the closure of several quarries and imposed large variation orders; (c) The uncertainties associated with the rehabilitation work, amplified with the testing restrictions imposed on historical buildings and structures, made it very difficult to anticipate the full extent of repairs and therefore required major adjustments in design and associated costs as the work evolved; (d) The difficulties in estimating the costs of upgrading underground infrastructure, including utilities networks displacement and relocation, generated the largest cost increase; and (e) The unusually high frequency of archeological chance finds in all five cities during project implementation caused unpredictable cost increases and unexpected delays due to the work site closure by the Directorate General of Antiquities (DGA) to allow the works to be redesigned. 8. The total amount of the Additional Financing is estimated at US$ million. It will be co-financed by the Government of Lebanon (GoL) in the amount of US$0.127 million and, in parallel, by the French Agency for Development (AFD) in the amount of Euro 21 million (approximately US$ million). The share of additional parallel financing provided by the AFD has already been approved (agreement dated December 15, 2011). 9. Alternatives Considered: The only alternative considered was the preparation of a new project, however this was rejected because it would force the project to close without fully achieving its PDOs. In addition, the new project would take a considerably longer time to obtain Parliament approval. Given that there are no proposed changes in the PDOs, new components, and new implementation/monitoring and evaluation (M&E) arrangements, additional financing was considered the more appropriate alternative. -2-

9 10. Project Description: The project is financed by IBRD in the original Loan amount of US$31.5 million. The project was approved by the Bank s Board of Directors on April 17, 2003 and became effective on February 3, The project is consistent with Lebanon s current Country Partnership Strategy (CPS) objectives and is engaged in promoting cultural tourism in five historic cities: Baalbeck, Byblos, Saida, Tripoli, and Tyre. The project s PDOs are to: (a) to create the conditions for increased local economic development and enhanced quality of life in the five cities; and (b) to improve the conservation and management of Lebanon s cultural heritage. The original project is co-financed by the Government of Lebanon in the amount of US$6.56 million; the French Agency for Development (AFD) in the amount of US$11 million; the Government of Italy in the amount of US$10 million; a grant by the French government in the amount of US$1 million, and the World Bank Loan of US$31.5 million. The Additional Financing will involve no change to the PDO and no joint co-financing. In addition to counterpart funding from the Government of Lebanon, the only parallel co-financier for the Additional Financing will be AFD. 11. The project has three main components: (i) rehabilitation of historic city centers and urban infrastructure; (ii) archeological sites conservation and management; and (iii) institutional strengthening and project management. Component 1: Rehabilitation of historic city centers and urban infrastructure. Activities under this component support the rehabilitation of the historic centers and urban infrastructure of the cities of Baalbeck, Byblos, Saida, Tripoli, and Tyre, and the promotion of cultural sensitivity and cultural tourism through: (a) upgrading and improving public spaces (such as streets, squares, commercial souks and residential areas) and infrastructure; (b) developing conservation and management of classified monuments and historic buildings and promoting their adaptive reuse; (c) supporting and developing productive and commercial activities related to cultural heritage, and promoting the participation of local populations; (d) rehabilitating the housing stock, including, inter alia, the construction and/or rehabilitation of housing units for temporary occupancy or resettlement purposes; (e) promoting the enforcement of zoning regulations defining historic city centers, including the establishment of a rehabilitation and construction permit system; (f) improving access to historic centers, traffic management and parking availability and regulation; (g) protecting and enhancing landscaping of coastal and green areas; and (h) carrying out technical and financial feasibility studies for urban redevelopment. Component 2: Archeological Sites Conservation and Management. These activities were designed to take place primarily in Baalbeck and Tyre, two of the main archeological sites of Lebanon, both inscribed on the UNESCO World Heritage list. Activities under this component support the conservation and management of archeological sites by: (a) conducting a program of research, inventory and documentation to the conservation and management of monuments and artifacts; (b) improving protection and conservation of exposed surfaces and structures; (c) improving landscaping, enhancing site protection and management and rehabilitating and/or expanding site museums; (d) improving and developing site presentation and visitor facilities, including the enhancement of visitor information capacities and the design of audio-visual programs and cultural circuits; and (e) preparing archeological studies. -3-

10 Component 3: Institutional Strengthening and Project Management. This component includes the following complementary technical assistance and capacity building activities: (a) strengthening the administrative and technical capacity of the five municipalities by rehabilitating, developing, maintaining and managing their historic centers; (b) reviewing the legal, regulatory and institutional framework governing cultural heritage; (c) strengthening the Directorate General of Antiquities; and (d) supporting the Project Management Unit to strengthen its capabilities in implementing the project. These activities will take the form of workshops, seminars, onsite technical assistance, and study tours. They also cover incremental operating costs. 12. The project Mid-Term Review (MTR) took place on May 17, 2007 and the scheduled Project Loan Closing Date has been extended to December 31, The project is in substantial compliance with loan covenants. 13. Overall Project Performance: During the early years of project implementation, the project was constrained by ongoing political turmoil, changes in project management staff, and the lack of sustained presence of social scientists or social safeguards specialists who could properly supervise and ensure full compliance with OP4.12 (Involuntary Resettlement). The project also suffered from a slow rate of disbursement (less than 50% after a four-year implementation). In November 2008, there was a Quality Assessment of the Lending Portfolio (QALP) review, which highlighted the need to improve project performance through strengthening its management staff, paying closer attention to social and environmental issues, and establishing a baseline and quantitative indicators in order to improve M&E. Taking into consideration the guidance provided by the QALP review, greater attention has been devoted since then to addressing the project s main weaknesses by streamlining implementation processes, increasing focus on capacity building in the municipalities, and adopting mitigation measures to minimize project risks. Noteworthy progress was made in many areas i.e., closely monitored contract supervision, cancellation of non-performing contracts, quality of works, setting up Technical Assistance (TA) units within municipalities, building up the Project Management Unit (PMU) capacity, etc. As a result, both the project implementation performance (IP) and the progress towards achieving the development objectives (PDO) substantially improved, and maintained their Moderately Satisfactory (MS) rating. 14. The PDO rating is justified as the project is making good progress toward meeting its development objectives as measured by the outcome indicators. The works implemented to date have clearly led to: (i) a drastic improvement in the quality of life of its inhabitants, particularly those resettled in Tripoli (71 families); and (ii) an improvement in the conservation and management of the built heritage, as evidenced best in Byblos, now considered a model for heritage rehabilitation in the Middle East region. With respect to the intermediate results indicators, implementation resulted in marked increases in the area of public spaces and facades rehabilitated; increased capacity of restaurants and cafes; and a substantial increase in rehabilitation permits for historic buildings. Since 2010, disbursements tripled, increasing from US$225,000 per quarter in 2009 to an average of US$740,000 per quarter in 2010 and the first part of This acceleration in disbursement occurred despite the changes in municipal leadership and confirms that CDR and the municipalities are fully committed to the project. 15. The continuous improvement observed over the last two years results mainly from CDR s dedication to the successful implementation of the project. Improvements in project performance -4-

11 are largely due to: (i) the revision of the M&E system, which now contains updated performance indicators that measure more appropriately the achievement of project objectives; (ii) full compliance with the Bank s safeguard policies; and (iii) improved attention to project management within the CDR, including strengthening of the PMU, as a follow-up to the Bank s recommendations and reports on institutional strengthening and project sustainability. In addition, the PMU has hired one senior social scientist and two junior social scientists in order to closely monitor the implementation of activities for compliance with OP.4.12 throughout the project life. The TA team was also strengthened both in Tripoli and Tyre with the hiring of a social worker in each location. The PMU team finalized the operational and management plan for the new market in Tyre, as well as the list of beneficiaries and the distribution map of vendors. It is currently completing the same process for the Tripoli market. In addition, the Mayor of Tripoli has appointed a manager for the platform where the market will be located, and the municipality has approved the market s draft operational manual. 16. Details on progress under each component: Component 1 (Rehabilitation of historic city centers and urban infrastructure): The loan proceeds are fully committed and the construction work is progressing very well in all five cities particularly: (i) the works for the rehabilitation of Khan Al Askar in Tripoli; and (ii) the Phase II of urban works in Saida, Byblos and Tyre. Simultaneously, progress is being made in fine tuning the operations and maintenance plans: (a) in Tripoli for the Abu Ali vegetable market and adjacent public spaces, and circulation and on-street paid parking plan around the old city; (b) in Tyre for the Bawabeh vegetable market, and the circulation plan and on-street paid parking in Tyre old city; and (c) in Saida for the public spaces (touristic paths in the old city, Bab El Serail Square, and Maritime Façade), and for on-street paid parking in selected zones (including the Maritime Façade). Component 2 (Archeological Sites Conservation and Management): The archeological sites conservation and management activities have made significant progress with the archaeological works (infrastructure) in Baalbeck and Tyre advancing well. Because these works are carried out for the first time at this scale in Lebanon by a contractor within important archaeological sites, tight and effective supervision arrangements have been adopted under close monitoring by the PMU and the DGA. The DGA capacity building activities have also taken place and an ambitious program has been finalized with the support of the relevant UN agencies. Component 3 (Institutional Strengthening): Institutional strengthening and project management activities have been undertaken through a constructive partnership between the CDR and the municipalities. While the CDR is focusing primarily on providing technical assistance and building capacity within the municipalities, the local authorities play a key role in supervising implementation, assessing the quality of works and managing the more sensitive political issues associated with resettlement and traffic plan enforcement. Although small, this component has a major positive impact in strengthening the ability and role of the municipal authorities in actively promoting local economic development. 17. Implementation Arrangements for the Additional Financing: The project will continue to be implemented by the same PMU established at the CDR and responsible for all aspects of the project management including procurement, financial management and disbursement activities, as well as the coordination with other agencies. After more than six years of practical experience, the PMU has adequate expertise in historical and cultural heritage -5-

12 restoration and renovation in the country. Going forward, the implementation arrangements include renewed attention to safeguards management, as evidenced with the recent hires of two social specialists (see Par. 27). The project coordinators have acquired expertise in World Bank safeguards management and are now well placed to address any remaining challenges. III. PROPOSED CHANGES 18. No changes will be introduced to the PDOs. The Results Framework has been modified for added clarity and to include more relevant indicators (Annex 1). The project institutional arrangements including financial management and disbursement will remain the same. 19. The activities funded under the Additional Financing Loan would be implemented over a period of approximately three years, i.e. until December 31, This implementation period is considered realistic given: (i) the presence of a strong and qualified PMU; (ii) the experience acquired through the first years of the project, both at the PMU and municipal level; and (iii) the advanced stages of the procurement process. In addition, the GoL has already pre-financed 20% of the works programmed under the Additional Financing, showing strong commitment to the project. 20. The proposed activities funded under the Additional Financing would fall into the existing components, as presented in the summary description and estimated cost table given in Annex 3. The table also presents the proposed IBRD share in the multi-donor funded program. 21. Restructuring of original Loan: In order to align the original Loan with the AF Loan, the original Loan will be restructured to: (a) align updated definitions, covenants and procurement procedures; and (b) extend the Closing Date to December 31, IV. APPRAISAL SUMMARY 22. Economic and financial analysis: Despite the cost overruns, the project investments are economically sound. The project remains consistent with its initial cost effectiveness approach to achieving its reconfirmed development objectives, by supporting investments that are the most cost effective and that focus on the public provision of key infrastructure, urban rehabilitation works with high development potential, and preservation of unique cultural heritage assets. The assumptions that were made at the outset of the project remain valid. Not undertaking the Project Additional Financing would result in: (i) destruction of sensitive and irreproducible cultural sites, landscapes and neighborhoods; (ii) environmental degradation and proliferation of brownfields in the city cores; (iii) the irretrievable loss of existing capital assets; and (iv) forgone tourism revenues. The selected investments remain the most effective alternatives to meeting the project s objectives and all components are also appropriate for the public sector to undertake, as outlined below and further detailed in the updated Cost Effectiveness Analysis (Annex 4). 23. Consistent with a least cost approach to achieving the PDOs, the project supports investments that are the most cost effective, in the best possible locations and at the optimal level of investment, i.e., in the major secondary cities that have the most cultural, social, and tourism potential to be preserved and developed. The project will continue to support the same most cost effective investments, focusing on Tripoli (US$26.12 million, including US$3.80 million from the additional Bank Loan); Tyre (US$14.85 million, including US$7.66 from the Bank Loan); -6-

13 Saida (US$5.22 million, including US$3.73 from the Bank Loan); and Byblos (US$3.17 million, including US$2.97 from the Bank Loan). Investments are limited to those representing the core of the urban cultural fabric, whose improvements are likely to encourage significant investment in the adjacent private establishments as evidenced, for example, in the increase in real estate values as well as in the added capacity of restaurants and cafes over the first few years of the project (see Annex 1). The rest of the investments will be devoted to archeological works on two of the country s World Heritage Sites (Baalbeck and Tyre) where tourism potential is also the greatest. 24. The type of investments implemented through the project requires public intervention: most of them (over 90%) take place on public land; moreover, private markets have been unable to either adequately preserve and develop the historic urban cores and archeological sites nor attend to equitable distribution of benefits from the possession of historic assets. Most public spaces are run down and in need of rehabilitation and many areas could be put to higher value uses through a change in regulatory measures. Private sector activities would benefit significantly as a result of the upgrading of urban cores. However, the private sector will not initiate the investments and bear the costs of upgrading the public spaces, as it would be incapable of recovering the costs of upgrading such public spaces that generally belong to the category of non-excludable public goods for use, for which it is impossible or difficult to charge. These investments in non excludable public goods represent about 40% of the total costs of Additional Financing. Another 43% will cover investments that would result in sub-optimal levels of the goods provided without Government intervention. They concern primarily the preservation of publicly accessible sites and monuments. Detailed information on the rationale for public sector involvement in project components is provided in Annex 4, Table Technical: The infrastructure works included in the Additional Financing are the same as in the original project. These were chosen after considering the needs and priorities expressed by the Council for Development and Reconstruction, the Directorate General of Antiquities and the participating municipalities of Baalbeck, Saida, Byblos, Tripoli, and Tyre. All technical issues regarding heritage management, and restoration and conservation works in fragile archeological sites were fully addressed during project preparation, after carrying out detailed assessments and studies by specialized international firms under the auspices of UNESCO World Heritage Center. The packages have been fully appraised and are technically ready to be implemented. 26. Environment: There is no change in the environmental category B as no new safeguard policies are triggered, therefore no new safeguards instruments will be prepared under this Additional Financing. The Environmental Impact Assessment (EIA) has been revised to incorporate, inter alia, the latest revision of the environmental management plan. The EIA has been prepared, consulted upon, cleared, and disclosed both in-country, and at the Bank InfoShop prior to appraisal. The Executive Summary of the EIA was translated into Arabic and has also been disclosed both locally and in the InfoShop. The proposed activities under the Additional Financing are of the same nature, and the project will continue to apply the same agreed environmental framework and mitigation measures, as updated. There are no unresolved environmental safeguard issues that require special attention. The last supervision mission (November 2011) highlighted that, during the rehabilitation activities in various cities, the primary adverse environmental impacts had been associated with the construction period and the temporary impacts associated with the re-routing of traffic around the construction areas. Nevertheless, these impacts have been minimized by careful planning of the staging used for construction and rerouting of traffic, as well as careful supervision of construction activities. In -7-

14 addition, since one of the main objectives of the project is the attraction of a larger number of visitors/tourists, special attention is being paid to the proper management of the valuable public space improved under the project, especially in terms of cleanliness and removal of increased amounts of solid waste. 27. Social: Compliance with social safeguard requirements is rated Moderately Satisfactory. The implementation of the expected social safeguards was considerably delayed due to technical and political reasons. The status of social safeguards implementation was rated as Moderately Unsatisfactory during the October 2011 supervision mission because several key issues were unresolved. However, CDR has made notable advancements in the context of social safeguards implementation. The PMU now has a strong technical team in place to help manage safeguards. With the recruitment of two additional social scientists in July 2011, much progress has been made by the PMU on the preparation of pending safeguards instruments, consultations with affected communities on each instrument, building general capacity, and meeting disclosure requirements. The PMU also has a very strong field presence, including field based staff, which has resulted in regular interactions with affected people, and local government authorities. This interaction also serves to strengthen the grievance redress process because field based staff (who are from the local area) are well known to affected peoples, and are thus available for airing viewpoints and complaints on a regular basis, if needed. There has also been closer Bank followup on the progress related to each instrument, supported in part by an action plan agreed upon by the PMU and followed up by weekly meetings. 28. Finally, two complaints (now resolved) by some community members created an opportunity for crisis management and for mutual learning. The first complaint (July 2011) pertained to grievances which mainly related to traffic plan provisions in Tripoli. The Tripoli Merchants Association (TMA), the main complainant, and the municipality arrived at a signed agreement followed by a reiteration by the TMA President to not only abide by the agreements reached, but also to facilitate project RAP implementation, including issues related to continued consultations and the effective relocation of vendors to the designated sites. The second complaint (August 2011) pertained to three complainants claiming they were eligible for compensation as per project census. It was shown that there was no validity to these cases but as a good will measure, one of the complainants has been placed on a wait-list for an apartment in the relocation site. 29. No new safeguards issues are triggered under the Additional Financing for this project and thus no new safeguards instruments will be prepared under the Additional Financing. The summary of safeguards instruments prepared under the overall project is as follows: an updated Resettlement Policy Framework (RPF) was cleared by the Bank in 2011 and disclosed in-country ( and at the Bank InfoShop in both English and Arabic. The overall project prepared a total of six RAPs. All six RAPs have been submitted to the Bank by the PMU. The English and Arabic versions of these RAPs have been disclosed in-country ( and at the Bank InfoShop. It came to the team s attention that the early RAP from 2002 had not been formally cleared nor disclosed at the time, but upon discovery of this issue, the Task Team made an immediate request to the PMU to locate, translate, and disclose this RAP in-country (this has been completed). The Task Team confirms that the 2002 RAP was implemented in a satisfactory manner. The project affected people are pleased with the relocation; a functioning grievance redress mechanism is in place, including accessibility to the PMU on relocation and general project issues. There is no discernible difference in implementation outcomes between -8-

15 all 71 relocated families (those relocated under the provisions of the 2002 RAP compared to those relocated under the provisions of the 2011 RAP). 30. Disbursement Arrangements. The proceeds of the Additional Financing loan will be disbursed in accordance with the Bank s traditional disbursement procedures, and will be used to finance project activities through the disbursement procedures currently used: i.e. Advances, Direct Payment, Reimbursement and Special Commitment. These will be accompanied by appropriate supporting documentation [Summary Sheets with records and/or Statement of Expenditures (SOEs)], in accordance with the procedures described in the Disbursement Letter and the Bank's "Disbursement Guidelines". The minimum application size for direct payment, reimbursement and special commitment will be the equivalent of 20% of the advance ceiling amount. 31. Designated Account. The Borrower will open a segregated Designated Account at Banque du Liban acceptable to the World Bank in US Dollars to cover the Loan's shares of eligible project expenditures. The ceiling of the Designated Account would be US$3 million. The Borrower will be responsible for submitting monthly replenishment applications with appropriate supporting documentation, along with a reconciled bank statement. The Designated Account will be audited annually in conjunction with the audit of the project financial statements. 32. Statement of Expenditures. Necessary supporting documents will be sent to the Bank in connection with contracts that are above the prior review threshold, except for expenditures under contracts with an estimated value of: (a) US$500,000 or less for Works; (b) US$150,000 for Goods; (c) US$100,000 or less for consulting firms; and (d) US$50,000 or less for individual consultants, as well as training and operating costs, which will be claimed on the basis of SOEs. The documentation supporting expenditures will be retained at the PMU and will be readily accessible for review by the external auditors and periodical Bank supervision missions. All disbursements will be subject to the conditions of the Loan Agreement and disbursement procedures as defined in the Disbursement Letter. 33. Financial Management (FM): The project financial management rating is Satisfactory. Overall, the financial management arrangements of the Project remain adequate, including staff competency, sufficiency and stability, proper utilization of the project management information system, timeliness and quality of the generated project interim un-audited financial reports and project financial statements, availability of documented implementation and FM procedures, adequacy of flow of funds arrangements, and quality of audit report. There are no overdue project audit reports. The audit report for the year ending December 31, 2010 was received by the Bank on June 29, 2011 with an unqualified opinion. The Additional Financing will be implemented by existing CDR FM staff who have acquired adequate knowledge of Bank reporting requirements and disbursements guidelines, as well as using the same agreed upon FM arrangements of the original loan. 34. Procurement: Project procurement is rated Moderately Satisfactory. The implementing agency has gained solid experience in procurement management. The agency has enhanced procurement processing and contract management capabilities. The unit is fully staffed with relevant technical skills (social development, architect, archeological projects, MIU municipal engineer, and two social development experts, in addition to management, procurement, financial and support staff). Administrative bottlenecks that may have delayed decision making -9-

16 have been identified and tackled. Project readiness is rated Satisfactory, given that out of a total of ten (10) contracts (four consultants, five works and one goods ) foreseen for new activities in the Additional Financing, one (1) works contract has already been contracted (Tripoli- Khan Al Askar); while another three (3) Bidding Documents are already prepared and two (2) are being finalized. 35. Based on the 20% limit for retroactive-financing, CDR has already made a commitment from Local Funding equivalent to US$5.4 million (US$1.7 million disbursed), against the projects earmarked under the Additional Loan. The procurement plan is regularly updated to reflect progress on the current Loan and the Additional Financing activities. For new bidding documents the project is already following the Bank guidelines as issued in January The Bank's retroactive financing will be for US$5.4 million for items procured in accordance with applicable Bank procurement procedures. Such payments do not exceed 20% of the Loan amount and pertain to payments that were made by the Borrower not more than 12 months before the expected date of the Loan Agreement signing (i.e. prior to April 18, 2011). 36. No exceptions are requested to the Bank s policies. The project s readiness is considered sufficient for approval of the proposed operation by the Board of Directors. -10-

17 Annex 1: Results Framework and Monitoring Cultural Heritage and Urban Development Additional Financing Results Framework PDO Revisions to the Results Framework Current (PAD) 1) Create conditions for local economic development and enhance the quality of life in the historic centers of five main secondary cities. Proposed Same Comments/ Rationale for Change 2) Improve the conservation and management of Lebanon s built cultural heritage PDO indicators Current (PAD) 1.1 Increased culture, tourism and heritage related local employment, and private sector investments, facilitated by municipalities. 1.2 Increased number of rehabilitated historic properties and public spaces in use for communal and tourist purposes. 1.3 Increased appreciation by residents and visitors of the contribution of cultural amenities to local quality of life and visitor experience. 1.4 Rising property values in and around areas of historic and cultural importance. 2.1 Increased employment of professionals in conservation and management of heritage. 2.2 Increased efficiency of archeological site; urban protected zones management. Proposed change* 1.1 Increased tourism and heritage related local employment, and private sector investments (now indicators 1 and 2). 1.2 Indicator deleted. 1.3 Indicator deleted. Now indicators 3 (residential units) and 4 (business units). 2.1 Indicator deleted. 2.2 Indicator deleted Facilitation by the municipalities is not essential. The important indicator is the increase in private investments. 1.2 Redundant with This indicator is highly subjective and difficult to document. 2.1 Does not prove to be a sufficiently significant indicator to assess evidence of improved conservation and management of the heritage. 2.2 There are currently no indicators available to measure the efficiency of the

18 2.3 Increased rehabilitation activities in historic urban cores in compliance with approved regulations recognizing the centrality of their cultural heritage to their economic and social development. Intermediate Results indicators Current (PAD) Revisions to the Results Framework Now indicator 5. Proposed change* Percentage of civil works progress (ISR) Increase in rehabilitation permits in city cores (ISR) Area of pedestrian public squares spaces (in sq. meters) (ISR). Area of facades of historic buildings rehabilitated (ISR) Number of cafés and restaurants (new) Number of seats and cafes and restaurants (ISR Number of individuals working in cafes and restaurants (ISR) Approved landmark conservation laws (ISR) Establishment of Municipal Units to operate and manage the city core (ISR) Degree of satisfaction after resettlement (new) Comments/ Rationale for Change management of the archeological site and urban protected zones. The project was approved in 2003 before the mandatory use of results frameworks was implemented in Bank projects. Therefore, there are no Intermediate Results Indicators presented in the PAD. Indicators were reported as part of the ISR and are represented under the proposed change column, in addition to indicators being introduced to strengthen the overall framework. -12-

19 Core REVISED PROJECT RESULTS FRAMEWORK Project Development Objective (PDO): (1) Create conditions for local economic development and enhance the quality of life in the historic centers of five main secondary cities; and (2) Improve the conservation and management of Lebanon s built cultural heritage. PDO Level Results Indicators 1. Increased tourism and heritage related local employment. UOM 1 Number of individuals working in the sector of culture, tourism and heritage related local businesses Baseline Original Project Start (2004) (2002) 662 Progress To Date (January 2012) (2011) 1027 Dec Cumulative Target Values Dec Dec Dec Frequency Yearly Data Source/ Methodology Counting- Survey Responsibility for Data Collection M&E Cons./ CHUD Team Comments Non- Cumulative/ All the cities have a big potential to increase the number of employees by 10% yearly (estimation). 2. Increased private sector investments. 3. Rising property values in and around areas of historic and cultural importance- Residential units. 4. Rising property values in and around areas of historic and cultural importance-business unites. 5. Increased rehabilitation activities in historic urban cores in compliance with approved regulations recognizing the centrality of their cultural heritage to their economic and social development % of business and property owners that have invested in their business or property development Residential units prices (USD per sqm) Business unit prices (USD per sqm) Number of rehab. permits (2008) 6.4% (2008) (2008) (2002) 36 (2010) 10% (2011) +30% (2011) +20% (2011) % 17% 22% 27% Yearly +33% +36% +39% +42% Yearly +23% +26% +29% +32% Yearly Yearly Survey- A Sample of business and property owners. Field Survey and research Field Survey and research Local Administratio n and Municipalities M&E Cons./ CHUD socio economic unit. M&E Cons./ CHUD M&E Cons./ CHUD CHUD Non- Cumulative/ Upon the Business Census- Wave1 done in is given as reference since 2011 was a stagnation period on the investment level figures based on national statistics (Cumulative) 2011 figures based on national statistics (Cumulative) Cumulative total. 1 UOM = Unit of Measurement. -13-

20 Beneficiaries Project most direct Beneficiaries (Residents) Project most direct Beneficiaries (Visitors) Project indirect Beneficiaries (overall city population) Number Number Number (2004) 37,529 (2004) 203,000 (2000) 565,000 (2011) 43,100 (2010) 308,000 (2011) 1,150,000 44,000 45,000 47,000 48,000 Yearly 325, , , ,000 Yearly 1,196,000 1,244,000 1,294,000 1,345,000 Yearly Preliminary study and demographic projections. Preliminary study and demographic projections Preliminary study and demographic projections M&E Cons./ CHUD- M&E Cons./ CHUD- M&E Cons./ CHUD- It concerns only the population living inside the CHUD project area. -14-

21 Core Intermediate Results and Indicators Intermediate Results Indicators Unit of Measure ment Baseline Original Project Start 2 (Jan. 2012) Dec Target Values Dec Dec Dec Frequency Data Source/ Methodology Responsibility for Data Collection Comments Intermediate Result 1: Cumulative Percentage of civil works progress % 20% 50% 80% 100% WB Additional Financing only Intermediate Result 2: Improved livability of the urban areas targeted by the project 1. Area of pedestrian public squares spaces sqm 2. Facades of historic buildings rehabilitated sqm (2006) 9,840 (2006) 42, , , , , ,830 Yearly CHUD TA and CHUD 211, , , , ,933 Yearly CHUD TA and CHUD Cumulative numbers- (works only in Tripoli in 2015). Cumulative numbers-. (works only in Tripoli in 2015). 2 WB Additional Financing only -15-

22 Intermediate Result 3: Improved local economic benefits in project cities 3. Number of restaurants and cafés Number (2002) Capacity in restaurants and cafés # of seats (2002) 5, Number of Individuals working in restaurants and cafés Number (2002) , Yearly Field Survey CHUD and CRI 13,605 15,000 16,500 18,000 20,000 Yearly Field Survey CHUD and CRI 1,410 1,475 1,550 1,650 1,750 Yearly Field Survey CHUD and CRI Cumulative numbers- 5% increasing per year (estimation). Cumulative numbers- 10% increasing per year (estimation). Cumulative numbers- 5% increasing per year (estimation). Intermediate Result 4: Improved conservation and management of built cultural heritage 6. Approval landmark conservation laws # of laws (2002) Over 2002 and 2011 Period CDR- Lebanese government CHUD and CDR (Cumulative) Intermediate Result 5: Improved performance of local institutions in charge of built cultural heritage 7. Establishment of Municipal Unit to operate and manage the city core units (2002) Over the lifetime of the Project Municipality and CDR. The objective is to have five units by the end of A unit for each city. -16-

23 ANNEX 2: OPERATIONAL RISK ASSESSMENT FRAMEWORK (ORAF) LEBANON: Additional Financing for the Cultural Heritage and Urban Development Project Project Stakeholder Risks Rating Substantial Description: Shopkeepers in the vicinity of Tripoli upgraded esplanade (Abu Ali platform) have contested its design, as well as the modification in the traffic plan and the proximity of the vegetable market. This situation may derail the Project implementation process as regards the Tripoli platform improvement subcomponent. Risk Management: The PMU, in collaboration with the municipality of Tripoli, has led an intensive process of consultation over the last few months. Modifications were made to the proposed traffic plan. The current design has been approved by the stakeholders and by the municipality (decisions endorsed by the council). The PMU is also following very closely on the process of transfer of the vegetable vendors to the market. Provisions have been included in the market design for progressive partial transformation of the vegetable market to handicraft selling activities, thereby improving the appearance of the esplanade as requested by some of the stakeholders. Resp: PMU/Municipality Stage: Implementation Due Date : 12/31/2015 Status: On-going Implementing Agency Risks (including fiduciary) Capacity Rating: Low Description: The PMU has experienced a fairly high turnover of staff (particularly social positions) over the first years of the Project, resulting in poor compliance with social safeguards, particularly with respect to communication and disclosure. The situation has been corrected over the last few months. Stage: Preparation/ Risk Management: A strong Project core is in place at the central level. The PMU has acquired unmatched experience in cultural heritage and is fully able to provide relevant assistance to the design and implementation of investments. A new team of social scientists has been hired. Resp: CDR Implementation Due Date : 12/31/2015 Governance Rating: Substantial Description: Internal disagreements within Tripoli Municipal Council may affect its commitment to support expedient implementation of the Project. Status: On-going Risk Management: The risk only affects one sub-component of the Project, i.e. the upgrading of the esplanade over the Abu Ali river in Tripoli. A number of decisions have now been enacted by the Municipality regarding the organization of the renovated esplanade, the operation of the market, and the new traffic plan. The CDR and CMU are following all developments very closely. Project Risks Resp: CDR Stage: Implementation Due Date : 12/31/2015 Status: On-going -17-

24 Design (Project overall) Rating: Low Description: The Project design is fairly complex but the operation has successfully disbursed for sub-projects and Risk Management: The PMU has demonstrated its experience and know-how in the conduct of activities. activities concurrently in five cities, which is a testimony to the adequacy of project design and implementation arrangements. The Project has been complemented by international organizations (including UN Habitat) and commended for international rewards. Resp: PMU Stage: Implementation Due Date : 12/31/2015 Status: On-going Social & Environmental Description: The Project failed to be in compliance with social and environmental safeguards, mainly because of lack of proper documentation and full disclosure. This caused: (i) a hold on some of the major on-going works in Tripoli, Tyre, and Saida; (ii) two postponements of the Loan Closing Date; and (iii) delays in the preparation of the Project Additional Financing. The complete original Environmental Impact Assessment (EIA) had not been fully disclosed at the Bank InfoShop. Rating: Moderate Risk Management : The situation has been addressed: the Resettlement Policy Framework (RPF) has been updated and disclosed. The Resettlement Action Plans (RAPs) (in English) have been updated and were disclosed in country and at the Bank s InfoShop prior to appraisal. The Arabic translations of these RAPs has been completed and disclosed in-country and at the Bank s InfoShop. The original EIA was revised and disclosed before appraisal. Social and environmental staff has been recruited by the PMU. Comprehensive environmental management plans are being prepared for both Tripoli and Tyre vegetable markets, clarifying the details of waste collection and overall cleanliness and hygiene requirements. Resp: PMU Stage: Implementation Due Date : 12/31/2015 Status: On-going Program & Donor Rating: Low Description: Relations with the parallel co-financier (AFD) are not considered risky for this AF as the PDO is unchanged. The donor has faith in the Bank s systems and processes re Risk Management: The co-financier is an integral part of the Bank missions and no additional measures are necessary. Appraisal of French AF has already been completed, in the amount of US$30 million. procurement and safeguard issues. They have been and will continue to follow the same processes as the Bank. Resp: Bank/ Stage: Preparation/ Co-donor Implementation Due Date : 12/31/2015 Status: On-going Delivery Monitoring & Sustainability Rating: Moderate Description: Cases of poor quality delivery and maintenance have occurred in the course of the Project, with the risk of some works falling into a state of disrepair because of negligence or insufficient funds for maintenance (archeological sites). Risk Management : The M&E system has been revised for the AF. Insufficient maintenance management has been addressed through: (i) incentives to DGA by way of capacity building; and (ii) by and large, municipalities have been consulted on the preparation of management plans for archeological sites improved by the Project. Resp: Bank/PMU Stage: Preparation/ Implementation Overall Risk Following Review Implementation Risk Rating Rating: Substantial Description: The overall risk rating is substantial due to the high country risk identified above as a result of the highly polarized domestic political situation, which might also be further exacerbated by a potential spillover from the Syrian uprising. Due Date : 12/31/2015 Status: On-going -18-

25 Components Annex 3 Cultural Heritage and Urban Development Project Additional Financing Project Costs and Financing Plan Appraisal Cost Estimate US$ million Incl. Contingencies 1 Rehabilitation of Historic City Centers and Urban Infrastructure Improvements Table 1: Estimated Project Costs and Financing Plan WB Financing Plan Revised Financing Plan as of January Additional Financing at Appraisal Updated 2011 Financing Plan Cost Estimate Total US$ million US$ million US$ million US$ million Additional AFD + Incl. AFD + Govt of Govt of Financing GoL Govt of Gap Italy Contingencies WB GoL Govt of WB GoL AFD Italy France France Rehabilitation of Baalbeck Historic city center Rehabilitation of Byblos Historic city center Rehabilitation of Saida Historic city center Rehabilitation of Tripoli Historic city center Rehabilitation of Tyre Historic city center Total Component Archaeological Sites Conservation and Management Baalbeck Archaeological Site Tyre Archaeological Site Detailed studies & Spn services for Baalbeck and Tyre Archeological works Tripoli Citadelle St Gilles Saida Château de la Terre: Consolidation interventions and site presentation Tyre and Byblos Archaeological Mapping Institutional Strengthening and Project Management Sub-total TA to the Municipalities Sub-Total TA to the DGA Sub-Total TA to the DGU Sub-Total Project Management by CDR Total Component Total World Bank Front End Fee Total

26 Table 2: Estimated Project Costs and Financing Plan (World Bank Loan Only) -20-